Tax season is here which means it’s time to start thinking about filing your 2024 taxes. Before you start, we’re here to make sure you’re up to date on some of the significant changes that have happened over the past year that could affect your tax return.
In this article, we’re going to provide you with a list of a few things that have changed and a few things that are carrying over from the previous tax season.
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Here’s a list of a few IRS updates and recent congressional acts and their tax implications affecting your taxes in 2024 and beyond:
IRS Increases the Per Diem Rates for the Transportation Industry
The per diem deduction for meals and incidental expenses increased to $80 per full day and $60 per partial day as of October 1st, 2024. The rate for January 1st, 2024 through September 30th, 2024 remains unchanged at $69 per full day and $51.75 per partial day. The IRS allows for an 80% deduction of the above amounts. If you are tracking per diem this means under the new rules the deduction for a full day has increased to $64 and the deduction for a partial day has increased to $48.
IMPORTANT NOTICE: You will need to calculate your total Per Diem deduction using the two different Per Diem rates. You need to keep this in mind when you are filing your 2024 taxes.
IRS Grants Disaster Relief to Victims of Hurricanes Helene and Milton
Taxpayers living in Alabama, Florida, Georgia, North Carolina, South Carolina, and parts of Tennessee and Virginia who filed extensions for their 2023 returns now have until May 1st, 2025 to file. Taxpayers living in the above disaster zones also have until May 1st, 2025 to file their 2024 returns and pay any taxes due. The IRS automatically grants disaster relief to affected taxpayers, if you suffered a loss due to any natural disaster in 2024 ask your tax professional if relief is available to you.
The Inflation Reduction Act
The Inflation Reduction Act was signed into law on August 16, 2022, and still applies in 2024. To the average self-employed truck driver, this act in many ways will have little to no effect on the way you conduct your business currently. However, it does provide new opportunities for tax savings and things to watch out for over the next 10 years.
Climate-Related Tax Credits
The Inflation Reduction Act provides roughly $369 billion in incentives for energy and climate-related programs. Many of the incentives will be seen in the form of tax credits. If a trucker or fleet has been on the fence about purchasing electric vehicles, these tax credits could push them to do so. However, does this mean you should go out and purchase an electric vehicle solely for the tax credit? Not necessarily. If you are considering a purchase of an electric tractor be sure to get all the facts first.
The act also extended The Residential Clean Energy Credit. As a result, homeowners who install solar panels can still reduce their current year's taxes by up to 30% of the total cost of the system, including installation. If the credit reduces your tax liability to zero, any remaining credit can be carried forward to the next year through 2034. The credit is limited to 26% in 2033 and to 22% in 2034. The tax credit becomes available to taxpayers in the year installation is complete.
Health Insurance and Care
The Inflation Reduction Act will extend some of the subsidies brought on by the Affordable Care Act. Specifically, it extends the subsidies for health insurance premiums available through the federal marketplace or exchange. These subsidies had been set to expire in 2023 but the Inflation Reduction Act has extended these subsidies through the end of 2025. Owner-operators in need of health insurance can search the Federal Marketplace to see if they qualify for a subsidy. Be careful when applying for a subsidy to make sure your income levels qualify. Additionally, a goal of the Inflation Reduction Act is to lower some healthcare costs overall. As a result, for those covered under Medicare Part D, out-of-pocket drugs will be capped at $2,000 in 2025. More private plans and Affordable Care Act plans also offer a $2,000 cap on prescription drugs in 2025 than in prior years.
For our complete Inflation Reduction Act article: Click Here
Bonus Depreciation
Beginning in 2018, the IRS allowed your business to take an immediate first-year deduction on any asset purchased during the year. This is because any qualified property purchased and placed in service between September 27, 2017, and December 31, 2022, was able to be depreciated by 100% of the cost of the property.
In 2023 the bonus depreciation goes down by an additional 20% each year. This means in 2024 bonus depreciation was available at 60%, in 2025 it will be 40%, in 2026 it will be 20%, and in 2027 there will be no bonus depreciation. The cost of the depreciated piece of property will be recognized as an expense and lower your taxable income.
Student Loan Interest Deduction Adjusted for Inflation
You may be able to deduct up to $2,500 of student loan interest paid. The deduction is subject to income limitations which have gone up for 2024. For joint filers, the deduction begins to phase out with a modified AGI of $165,000 and reduces to zero at $195,000. For single and head of household filers, the phaseout begins at $80,000 and reduces to zero at $95,000. For those married filing separately, the deduction is not allowed.
Key Changes for Retirement Income
For those in, or approaching, retirement, the age for taking required minimum distributions (RMDs) has increased to 73. RMDs are required for retirement plans like 401(k), 403(b), 457(b), traditional IRAs, SEP, and SIMPLE IRAs. For those who turn 73 in 2024, you must take your first RMD by April 1, 2025, and you must take your second RMD by December 31st, 2025. The penalty for failing to take the RMD has decreased from 50% to 25%, and that penalty is decreased to 10% for timely corrections.
1099-K
The 1099-K is likely not going to affect the trucking business per se, but if your spouse has a business or you have a side business you may see one this year. Many platforms such as eBay, Venmo, Zelle, and Etsy, to name a few, will potentially be issuing these forms. The threshold for issuing 1099-Ks has changed from $20,000 and 200 transactions in 2023 and prior years to $5,000 in 2024 and future years. While the 1099-K should only be issued for business transactions, given the recent change, it is possible you could get one for reimbursing your friend for concert tickets or similar transactions. This can be corrected by contacting the issuer of the 1099-K, or, if all else fails, it can be corrected on the tax return at the time of filing.
The bottom line is that being aware of these changes can potentially save you money on your taxes. Many of these changes could be temporary, so make sure you’re taking advantage of them now while they are available. If you have any questions, feel free to give us a call at (866) 920-2827 or email us at info@atbs.com.
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